Company’s acquisition of AK Steel could bring new life to Ashland mill

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A Cleveland company that is North American’s largest producer of iron ore pellets has entered into an agreement to purchase AK Steel, and the  shuttered mill in Ashland appears to be in its future.


Cleveland-Cliffs Inc. announced the merger agreement with AK Steel on Tuesday morning that requires Cliffs to purchase all of the issued and outstanding shares of AK Steel common stock.


The transaction will combine Cliffs with AK Steel, a leading producer of innovative flat-rolled carbon, stainless and electrical steel products, to create a vertically integrated producer of value-added iron ore and steel products. The combined company will be ideally positioned to provide high-value iron ore and steel solutions to customers primarily across North America.


AK Steel shuttered its 100-year-old mill in Ashland last month, but the transaction could bring a new, albeit slightly different, life of producing merchant pig iron.


In a release on businesswire.com Tuesday morning, Cliffs CEO Lourenco Gonclaves said growth opportunity for Cliffs included “the potential future utilization of the blast furnace in Ashland to produce merchant pig iron, an opportunity neither company could pursue on a standalone basis.”


The potential startup of pig iron manufacturing at AK Steel’s facility in Ashland creates future opportunities for pellet demand and more metallics products without significant additional capital expenditures, the company said.


Pig iron is the product of smelting iron ore with a high-carbon fuel and reductant such as coke, usually with limestone as a flux. Pig iron is produced by smelting or iron ore in blast furnaces or electric furnaces.


“The combination of Cliffs’ iron ore pellet capabilities and our innovative, high-quality steel product development and production is strategically compelling,” said AK Steel CEO Roger K. Newport. “Together, we expect to be able to take advantage of growth opportunities faster and more fully than either company could on its own.”


Newport, who will retire when the deal is complete, said the 120-year heritage of AK Steel and its “expertise in steelmaking” make the merger a good combination which will “facilitate a smooth integration process.”


Under the terms of the merger agreement, AK Steel shareholders will receive 0.40 shares of Cliffs common stock for each outstanding share of AK Steel common stock they own.


Upon completion of the transaction, Cliffs shareholders will own approximately 68% and AK Steel shareholders will own approximately 32% of the combined company.


“By combining the best-in-class quality of AK Steel’s assets and its enviable product mix with Cliffs’ debt profile and proven management team, we are creating a premier North American company, self-sufficient in iron ore pellets and geared toward high value-added steel products,” Gonclaves said.


The transaction is expected to close in the first half of 2020, subject to approval by the shareholders of both companies, receipt of regulatory approvals and satisfaction of other customary closing conditions.


Cliffs has obtained an approximately $2 billion financing commitment from Credit Suisse in connection with a new Asset Backed Loan and the refinancing of AK Steel’s 2023 senior secured notes.

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